Student Loan Consolidations

Student loan consolidations can be an excellent way for students to make their loan repayment more convenient and affordable. Before making that decision, however, students need to have some basic facts about when to consolidate and what alternatives are available.

Student Loan Consolidations: When to Consolidate

Most student loan consolidation efforts take place within the six-month grace period after graduation. The reason is that the federal consolidation program does not allow students to consolidate loans while they are still in school and because interest rates are lower on the student loans during this period.

Students are not required to consolidate only during that period though. In fact, students can consolidate any time after graduation. They should pay attention to current interest rates though. Unlike student loans which have variable interest rates, the consolidated loan will have a fixed rate so students want to wait until interest rates are low in order to keep their costs down.

Student Loan Consolidations: Alternatives

While student loan consolidations do have many benefits, some students may not want to take the risk of paying a higher interest rate or extending their repayment period. In these cases, students may want to investigate other alternatives.

Student loan lenders offer a number of payment options, including some with low fixed minimum payments, so students can afford to make their monthly payments. Deferments and forbearances are also available to students in many cases, including financial hardship situations. Consolidated student loans also include many of these same options.

Another possibility is loan serialization. A lender purchases a student's loans from other lenders, then allows the student to pay the loans back one at a time. Unlike consolidation, these loans remain separate. The payments are usually lower, but the repayment period may be longer. However, the interest rates continue to be variable.

Finally, students may want to look into loan-forgiveness programs. These programs will pay or erase part of a student's loan debt in exchange for certain types of work. For example, teachers who work for five years in specific low-income areas can have up to $5000 of their student loan debt repaid. Other programs are also available.

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